The millennial mindset.

Author:Shuster, Bradley
Position:PURCHASE MARKET
 
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Mortgage lenders and private mortgage insurers can play a key role in boosting the homeownership rate of millennials. But first we need to get a better understanding of what they actually think about housing.

Mark Twain is reputed to have said, "All generalizations are false, including this one." That certainly seems to be the case with commonly held notions about millennials--the nation's most powerful demographic since the baby boomers. These generalizations can be misleading, if not entirely false--especially to those trying to help millennials buy a home. [paragraph] For example, some of the popular notions about millennials are that they feel entitled, are riddled with debt, like to frequent exciting urban areas, are too self-absorbed to think about starting families and are content to remain in their parents' basement. [paragraph] None of these notions adds up to millennials as key mortgage prospects. But are they accurate? [paragraph] I'm the father of three millennials, and also work with many at my company, so I can safely say those negative descriptions don't fit all of that generation. I believe, instead, that they hold great promise as future homebuyers.

In fact, to better understand and meet the needs of the millennial generation, National MI has forged a strategic relationship with Kristin Messerli, founder and managing director of Los Angeles-based business consulting firm Cultural Outreach Solutions and a millennial herself.

"Whenever I ask a room full of people what comes to mind when they think of millennials, I hear 'entitled, lazy and seeking instant gratification,'" Messerli says. Millennials are actually very hard-working, but their work habits differ from previous generations, she notes. "Some [want] to work in a different environment, like a coffee shop," she says. "They are working very hard, but their hours may be different than the traditional 9-to-5."

The kids are all right

Generalizations aside, mortgage lenders would be wise to tap into the mindset of the younger generation. Consider the numbers. According to the Pew Research Center, Washington, D.C., there are about 76 million millennials in the United States today--that is, people who were born between 1982 and 2004 (as defined by Neil Howe and William Strauss, who originally coined the term "millennial generation). That makes them the largest generational segment of the U.S. population ever.

But while baby boomers are downsizing and looking to retire, millennials are struggling harder than boomers did to build wealth. MarketWatch reported in January 2016 that 70 percent of those graduating with bachelor's degrees do so in debt, which translates to about 40 million young Americans. On average, the class of 2015 left college with just over $35,000 in student loan balances, according to MarketWatch, citing figures from Edvisors Network, a financial aid website.

Meanwhile, the job market has improved so slowly since the financial crisis that demand for career-starting jobs among college graduates has far outstripped supply.

In an April 2015 report, "Millennials and the U.S. Economy," New York-based Standard & Poor's Chief U.S. Economist Beth Ann Bovino reported that millennials are facing unprecedented economic factors that force many into accepting jobs they would not have considered taking in stronger economic times.

The student-debt loads carried by millennials are indeed delaying their ability to purchase homes. Bovino writes that "Millennials are saddled with huge student loans--around 60 percent of the $1.2 trillion outstanding." Still, she believes their career success has been delayed, not canceled.

"In our baseline scenario, we think that the kids will, so to speak, be all right, for the most part. The job market will provide work, wages will increase and, despite a somewhat slower-growth economy than in previous rebounds, millennials will start buying homes and cars to support their growing families, though at a different pace than their moms and dads."

Economist Ken Rosen, chair of the Fisher Center for Real Estate and Urban Economics at the University of California Berkeley's Haas School of Business, agrees.

"Millennials are very slow to turn from renters to homeowners," he says. "We saw some...

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